By Staff Reporter
ADDIS ABABA – (BORKENA) – The Ethiopian Capital Market Authority, which is responsible for regulating financial services, has been instructed by the Ministry of Justice to begin issuing licences to foreign banks, according to sources.
The head of the authority, Biruk Taye, confirmed the news and reports that this is a significant move for the country’s financial sector.
Ethiopia has opened its economy to foreign investment, which has allowed companies like Safaricom to enter the domestic market, Biruk said.
However, analysts report that the unpredictable regulatory environment, security breaches, and overall economic instability have hindered operations of these companies.
The report noted that investment banks are currently non-existent in Ethiopia and further mentioned the difficulty in obtaining loans due to high collateral requirements by existing commercial banks. Biruk stated that the demand for financial capital is high in Ethiopia.
However, borrowers asking for 25% interest and 70% collateral is an obstacle to increasing capital.
The report highlighted that Ethiopia is experiencing a significant foreign currency shortage. Last month, it missed a $1 billion bond payment, resulting in a $33 million default.
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